2024 (11) TMI 52 - AT - Central Excise

Recovery of duty of central excise under section 11A of Central Excise Act, 1944, along with applicable interest and penalty - additional consideration for sale of manufactured goods - remission of the net present value (NPV) of the accumulated amount as full and satisfactory compliance with the dues - inclusion of difference between the amount collected and the net present value (NAV) , computed with the date of schedule payments as benchmark, in the assessable value - HELD THAT - The issue stood covered by the decision of the Tribunal in COMMISSIONER OF CENTRAL EXCISE, RAIGAD, BALKRISHNA INDUSTRIES LTD., ESSEL PROPACK LTD. VERSUS UTTAM GALVA STEELS LTD., BHUSHAN STEEL LTD., JSW ISPAT STEEL LTD., COMMISSIONER OF CENTRAL EXCISE, AURANGABAD 2015 (10) TMI 1727 - CESTAT MUMBAI which, in identical circumstances of dispute of another similarly situated automotive parts manufacturer, RATIONAL ENGINEERS PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, THANE I 2023 (11) TMI 363 - CESTAT MUMBAI was considered. It is found that the issue did come up in the above referred dispute and it was held therein that 'Among the terms actually paid or actually payable used in transaction value, actually paid is not relevant in the present set of appeals. What is relevant is actually payable . Actually payable at the time of clearance is the deferral sales tax. Thus, in our view, the amount of deferral sales tax will require to be excluded.' It was further held that 'the actual amount paid is equal to NPV (which is less than originally payable), cannot make the amount actually payable at the time and place of removal different, particularly when under Sales Tax Law such a payment is considered as deemed payment of the sales tax payable. Quantum of sales tax payable does not change in the above scheme of pre-payment.' In view of the decisions of the Tribunal, deciding on the dispute arising from the peculiar features of the said scheme of the Government of Maharashtra, the impugned order set aside - appeal allowed.

Summary

Issues Involved:

1. Whether the retention of sales tax under the Package Scheme of Incentive 1993 should be included in the assessable value for excise duty.
2. The applicability of the net present value (NPV) payment option to discharge deferred sales tax liability and its impact on assessable value.
3. The relevance of previous judgments and legal principles to the current case.

Issue-Wise Detailed Analysis:

1. Inclusion of Retained Sales Tax in Assessable Value:

The primary issue was whether the amount of sales tax retained by the appellant under the Package Scheme of Incentive 1993 should be included in the assessable value for excise duty purposes. The appellant was allowed to retain a portion of the sales tax collected, which was to be repaid in installments or through a net present value (NPV) option. The central excise authorities argued that the difference between the collected amount and the NPV should be included in the assessable value of the goods. The Tribunal referred to the case of Super Synotex, where it was debated whether sales tax retained by the manufacturer forms part of the transaction value. However, the Tribunal noted that the specific issue of deferred sales tax liability and its discharge through NPV was not addressed in Super Synotex.

2. Impact of NPV Payment Option on Assessable Value:

The Tribunal examined the amendment in 2002 that allowed manufacturers to discharge deferred sales tax liability by paying its NPV. The Tribunal emphasized that the law provided an option to pay the NPV, which did not alter the sales tax liability or its character. The Tribunal cited the Kinetic Engineering Ltd case, which clarified that deductions for sales tax should be based on the amount actually paid or payable at the time of removal of goods. Changes in liability due to subsequent amendments should not affect the assessable value determined at the time of removal. The Tribunal held that the appellant could not be held liable for changes in law that occurred after the clearance of goods.

3. Relevance of Previous Judgments and Legal Principles:

The Tribunal relied on several judgments to support its decision. In Indo Hacks Ltd. and MRF Ltd., it was held that subsequent changes in price or tax liability do not affect the assessable value determined at the time of clearance. The Tribunal also referred to the C.B.E. & C. circulars, which clarified that deductions for sales tax are permissible based on the amount billed, irrespective of retention or incentives. The Tribunal noted that these circulars are binding on the department, as held by the Hon'ble Apex Court in Paper Products Ltd. and Dhiren Chemicals. The Tribunal found that the Revenue's arguments were inconsistent with these principles and rejected them.

Conclusion:

In conclusion, the Tribunal set aside the demand and other detriments imposed by the Commissioner of Central Excise & Service Tax, Pune, and allowed the appeal. The Tribunal held that the peculiar features of the Maharashtra scheme and the legal principles established in previous judgments supported the appellant's case. The retention of sales tax under the scheme and the subsequent option to pay NPV did not warrant inclusion in the assessable value for excise duty purposes. The order was pronounced in the open court on 03/10/2024.